For decades, the standard debt collection approach was to call consumers on the phone and send them letters. Many collectors still use this approach, while others are embracing a digital-first approach to meet shifting preferences. The question many businesses are asking is, are traditional debt collection phone calls and letters still effective?
Like many aspects of the debt collection industry, the answer to this question is nuanced. While phone calls and direct mail still offer value in some circumstances, there are shortcomings collectors need to be aware of. Let’s take a closer look at what’s working for these communication channels, what isn’t, and how businesses can bridge the gap.
Direct Mail for Debt Collection – Trusted but Fragile
With less physical mail being sent to consumers, letters have the advantage of being unique in a digital world by having a physical presence. A tangible reminder can cut through the clutter and get the attention of consumers. Similar to digital channels like email and SMS, letters also give consumers the ability to review their options on their own timeline. Here’s what’s working for this channel:
- Legitimacy: For many consumers, physical mail carries a sense of legitimacy that can help encourage them to take action.
- Informational Depth: Direct mail provides physical copies of disclosures which some consumers still prefer. Email doesn’t have the same capability, unless consumers print them out on their own.
Where Direct Mail is Falling Short
- Slow Feedback and Tracking Issues: Direct mail often takes days to arrive, and tracking how consumers engage with it is much more difficult to measure.
- Cost Inefficiencies: Between the labor involved and the price of stamps steadily rising, the cost of sending mail is getting more expensive. It’s becoming a higher cost-per-contact channel that can lead to diminishing returns.
- Lack of Frictionless Payment: A letter requires consumers to take extra steps to complete a payment such as mailing a check back, scanning a QR code or logging into a website. Every added step can add friction and reduce recovery rates.
Debt Collection Phone Calls are Hit or Miss
Phone outreach has been a staple of debt collection strategies, and it still remains one of the best channels for businesses to extend empathy towards consumers. Some consumers also feel more comfortable talking through resolution options with human agents as well. Here’s what else is working for debt collection phone calls:
- Immediate Resolution Capabilities: When a consumer calls in or answers the phone, a human agent can engage with them and resolve the account quickly.
- Human Empathy: For complex cases or sensitive accounts, a human agent who can listen and extend empathy is much more likely to succeed than any other communication.
Where Phone Calls Are Falling Short
- Low Answer Rates: Consumers rarely answer phone calls from unknown numbers, and access to call-screening software has never been more accessible. This means the majority of outbound calls are ignored, flagged as spam, or go straight to voicemail.
- Negative Consumer Sentiment: Unexpected calls can give consumers added stress and anxiety. Some consumers feel like it puts them at a disadvantage before even speaking to a human agent.
- Operational Bottlenecks: Outbound calling can put a heavy strain on human agents, which can lead to them having less time to deal with more complex cases or volume during peak contact hours.
The Solution – Embracing an Omnichannel Approach
Phone calls and direct mail still have benefits for debt collectors, but running these channels in a silo isn’t likely to get results. This is where an omnichannel approach can provide a variety of benefits to overcome the shortcomings of letters and phone calls. For starters, an omnichannel debt collection approach uses digital channels like email and SMS alongside traditional channels to support modern consumer preferences. In addition, all the communication channels talk together using account data and past historical behavior to create a personalized experience for consumers.
There are also strategies that can be used to help collectors bridge the gap between traditional and digital communication channels. For example, collection letters can include a QR code that consumers scan that takes them to a convenient online payment portal, bypassing human friction. When a debt collection strategy is able to leverage traditional and digital channels, there’s a much higher chance that it will be able to meet the preferences of more consumers.
Phone calls and letters aren’t dead in debt collection, but their role has evolved. Instead of being the main focus, these traditional channels are often more effective playing supporting roles and giving consumers more options to resolve their financial obligation on their own terms.
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TrueAccord is the premier omnichannel agency that specializes in using data-science and AI technology to deliver superior results with a consumer-centric approach. TrueAccord’s collection strategy uses a patented machine learning algorithm that takes the guesswork out of collections. It works to send the right message, at the right time, and through the right channels for each consumer. Contact us today to learn more.